Northern Rock repossessions rocket

Nationalised Northern Rock has announced its repossessions rocketed last year to 63%.

The bank's annual report revealed at the end of 2008 it had 3,620 repossessed homes, while a year earlier it had 2,215. This latest announcement comes after Northern Rock revealed pre-tax losses for the year of £1.36 billion.

At the end of September the number of repossessed homes held by the bank was at its highest at 4,201.

Northern Rock said repossession is only ever a last option when everything else has failed and it waits at least six months after the homeowner has fallen behind with payments.

But the overall rise during 2008 is due to Northern Rock being left with riskier customers as the bank drove higher-quality borrowers elsewhere to pay off its huge Bank of England loans.

The plans to shrink the business saw its overall residential mortgage book fall 27% to £66.7 billion, but arrears jumped sharply.

A total of 17,264 of its borrowers are three months or more in arrears - nearly five times as many as a year earlier.

The bank's infamous Together mortgage - which lent up to 125% of the value of a home before being pulled in February 2008 - now accounts for 29% of its mortgage book, up from 24% a year ago.

"Together customers on average have a higher loan-to-value and, therefore, in current market conditions, can find it more challenging to move their mortgage to another lender," the bank said.

Northern Rock took £23.6 billion out of the mortgage market last year as customers moved elsewhere, paying off £18 billion of the £26.9 billion it owed the Bank of England in the process.

But the bank will slow the pace of its redemptions in a bid to ease the current mortgage drought and last week announced plans to offer up to £14 billion in new lending over the next two years.

The lion's share of Northern Rock's losses came due to a four-fold rise in loan impairment charges to £894.4 million.

But the firm said it had attracted an extra £9 billion in savings deposits, bringing retail balances to £19.6 billion.